Labour and the Greens are promising a major intervention in the retail power system in a bid to lower residential power prices if they win next year's election.

It is a move that could have a major impact on the sale of three state-owned power companies.

The parties would create a new Pharmac-style agency called NZ Power to act as a single buyer of wholesale electricity, Labour leader David Shear and Greens co-leader Russel Norman have just announced at Parliament.

Rather than paying power companies a high price for electricity no matter how much it cost to produce, the new agency would set a what he called a "fairer pricing system".

Mr Shearer estimated it would cut the nation's power bill by up to $700 million a year.

He said it was likely to have an impact on share prices so he had written to the board of Mighty River Power, 49 per cent of which is about to be floated on the stock exchange by the Government, and to shareholding ministers asking them to issue a supplementary disclosure.

"This will allow Kiwis who have applied for shares since Monday to reconsider"

Labour's finance spokesman David Parker said two thirds of the $700 million a year savings would go to households, cutting their annual power bill by an average of $230 to $330 a year. The remaining savings would go to businesses.

Business and Economic Research Ltd had estimated the plan would provide a $450 million boost to the economy and add 5000 jobs.

Mr Shearer said Labour had been working on the plan for some time and it was not an attempt to derail the Government's Mighty River share offer which began this week or the wider asset sales plan.

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Mr Shearer said Labour and the Greens had been working on their plans for reform in parallel but had only in recent days realised they had the same central plan to establish the single buyer model.

However, the Greens' plan version is slightly different in that it would have progressive pricing.

"Every household will get a block of low-cost electricity each month from the savings that NZ Power achieves," Dr Norman said.

"That will save each family $300 a year, while encouraging efficient use of power at the margins."

"NZ Power will be explicitly mandated to prioritise renewables, energy efficiency, and resilience of our electricity system. For the first time we will have a major player in the system that is committed to energy efficiency."

Mr Shearer said the plan would take revenue out of New Zealand's power companies including Mighty River and others earmarked for partial sale under the National Government's mixed ownership model.

"It will devalue the companies."

As far as the impact on those companies' share prices, "it's up to the market".

"For the last 13 or 14 years we've had companies making super profits and in effect paying for those profits have been ordinary New Zealanders through their higher electricity prices."

He said the plan would ensure "a fair return" for those companies, "but it won't be at the super profit level that it currently is at the moment".

Asked whether a Labour Greens Government would expect to face compensation claims from affected investors, Mr Parker said "no more than compensation was paid to Telecom when some of their excessive profits were stripped out".

"You cannot justify overcharging people tomorrow just because you overcharged them yesterday."

POWER PLANS:

• A new independent Crown entity "NZ Power" will act as a single buyer of wholesale electricity with the power to set prices.

• There will still be a wholesale pool for electricity and the price will still vary regionally, reflecting transmission costs and line losses.

• NZ Power will on-sell electricity to retailers on the basis of long-term contracts.

• Large users will be able to contract directly with NZ Power.

• NZ Power or Transpower will decide on what generation should be despatched. It will also be able to direct generators to use available capacity.

• NZ Power will cover all of its costs, including its electricity trading operations, over the long term.

• NZ Power will take on the majority of all current regulatory functions and powers.